• AMD saw its GAAP revenues for Q1 2025 decrease 3% QoQ and increase 36% YoY, driven by strong performance of the data center, and client and gaming segments.

• AMD’s guidance for Q2 2025 suggests continued robust growth, despite macro and regulatory headwinds.

• Pull-ins as a result of tariffs seemed to play a big role in Q1 and are expected to continue in Q2, with the second half of 2025 diverging from typical seasonality.

AMD reported GAAP revenues of $7.4 billion for Q1 2025, a 3% QoQ decrease and 36% YoY increase that beat Wall Street’s estimate of $7.1 billion. Client revenue in Q1 2025 was $2.3 billion, down 1% QoQ and up 68% YoY (up 23% QoQ and 58% YoY in Q4 2024).

For Q1 2025, AMD generated a net income of $709 million, a 47% QoQ and 476% YoY increase. Gross margin was 53.6%, a 40-basis-point decrease from Q4 2024 and a 350-basis-point increase from Q1 2024, driven by a higher overall percentage of data center product sales and a richer Ryzen processor mix.

For notebook PCs, AMD noted that AMD-based notebook sell-through was very strong in the quarter. Strong demand was seen for its latest-generation AI PC processors as sales ramped up, increasing by more than 50% QoQ. The first notebooks powered by the new high-end Ryzen AI Max Plus and the first mainstream Ryzen AI 7 and 5 300 series processors launched to very positive reviews.

AMD also noted that demand for AMD-based commercial PCs was very strong in the quarter. Ryzen Pro PC sell-through grew more than 30% YoY, driven by new end-customer wins and an 80% increase from 2024 in the number of AMD-powered commercial systems from HP, Lenovo, Dell and Asus. AMD closed multiple wins with large auto, energy, healthcare, financial services and telecom companies in the quarter. Looking more broadly across the PC market, AMD remains confident that it can grow client processor revenue well ahead of the market in 2025, led by expanding adoption of its desktop channel and consumer and commercial notebook portfolio, as well as a richer mix.

During the earnings call, AMD Chairman and CEO Lisa Su noted, “We delivered an outstanding start to 2025 as year-over-year growth accelerated for the fourth consecutive quarter driven by strength in our core businesses and expanding data center and AI momentum. Despite the dynamic macro and regulatory environment, our first quarter results and second quarter outlook highlight the strength of our differentiated product portfolio and consistent execution positioning us well for strong growth in 2025.”

During the Q&A, a question was asked about customer pull-ins of notebook PC and desktop PC products, considering the 68% YoY growth for the client segment – What are some of the drivers of strength for the client segment in Q2? AMD responded that for the client segment performance, AMD has looked very carefully at the ordering patterns and what customers are telling it. AMD has not seen a lot of tariff-related activity in that business. What AMD has seen is a stronger mix of strength in its overall ASPs. For Q2, AMD continues to see strength in the client segment.

Another question was asked about the assumptions around the client segment. If one were to just flatline the Q1 actual numbers, AMD would grow the business above 30%. In addition, ASPs provide huge tailwinds. How should the market think about traditional seasonality in the second half, particularly with the potential of some pull-in of inventory in the first half? AMD responded that its client segment’s business performance is primarily driven by the strength of the product portfolio, supported by some of the desktop channel products that traditionally are not so well tracked. AMD is planning for lower growth in the second half, given that it is off to a strong start in the first half of the year. As such, AMD does not expect to see typical seasonality trends since the first half is expected to be better.

Comparing inventory to the Cost of Goods Sold (COGS), the inventory-to-COGS ratio went from 1.52 in Q4 2024 to 1.73 in Q1 2025. Too much inventory can lead to continued price cuts and lower margins.

For Q1 2025, by business segment:

• Data Center revenue was down 5% QoQ and up 57% YoY to $3.7 billion, primarily driven by continued CPU server share gains across both cloud and enterprise customers, and strong growth of AMD Instinct GPUs. The data center segment primarily includes server microprocessors (CPUs) and graphics processing units (GPUs), data processing units (DPUs), field programmable gate arrays (FPGAs) and adaptive system-on-chip (SoC) products for data centers. The segment’s operating income was $932 million, or 25% of revenue, compared to $541 million, or 23% of revenue, a year ago.

• Client revenue was down 1% QoQ and up 68% YoY to $2.3 billion. More than half of the growth was driven by higher ASPs from a richer mix of high-end Ryzen processors. The client segment primarily includes CPUs, accelerated processing units that integrate microprocessors and GPUs (APUs), and chipsets for desktop and notebook personal computers. Gaming revenue was up 15% QoQ but down 30% YoY to $647 million.Client and gaming segment operating income was $496 million, or 17% of revenue, compared to $237 million, or 10% of revenue, a year ago, driven by operating leverage on higher revenue.

• Embedded revenue was down 11% QoQ and 3% YoY to $823 million. The segment primarily includes embedded CPUs and GPUs, FPGAs and adaptive SoC products. Operating income was $328 million, or 40% of revenue, compared to $342 million, or 41% of revenue, a year ago.

• All other operating income, which includes certain expenses and credits that are not allocated to any of the operating segments, such as amortization of acquisition-related intangible assets, employee stock-based compensation expenses, acquisition-related and other costs, inventory loss at contract manufacturers and licensing gains. These together had an operating loss of $950 million.

Source: AMD Q1 2025 Presentation

On guidance for the second quarter of 2025, AMD noted that in April, a new export license requirement was put in place for MI308 shipments to China, the impact of which is included in the guidance. AMD expects revenue to be approximately $7.4 billion, plus or minus $300 million. This includes an estimated $700-million revenue reduction due to the new export license requirement. Despite this headwind, the middle point of the guidance represents 27% YoY revenue growth. For the full year 2025, AMD estimates the revenue impact due to the export license requirement to be approximately $1.5 billion.

Sequentially, AMD expects the client and gaming segment’s revenue to increase by a double-digit percentage, embedded segment revenue to be flattish, and the data center segment’s revenue to decrease due to the exclusion of MI308 revenue. In addition, AMD expects the second-quarter non-GAAP gross margin to be 43%, inclusive of approximately $800 million in charges for inventory and related reserves. Excluding this charge, the non-GAAP gross margin would be approximately 54%.

Tariffs and China restrictions were top of mind during the earnings call, with both creating an outsized impact on the company’s short-term top-line guidance. “AMD’s client side will be sensitive to tariffs and the canary in the coal mine here is panel orders,” said David Naranjo, Associate Director, adding, “There is some risk considering reports from the supply chain that panel orders for notebook PCs have started to skew from normal seasonality, at least looking down the next couple of quarters.”

Offsetting some of the risk around AMD’s client business is what appears to be regulatory easing around AI chip exports. “It looks like the US is getting ready to relax export restrictions for AI chips that were part of the AI Diffusion rule set to take effect May 15. This is good news not just for AMD but the segment overall,” noted Naranjo.

AMD is also favorably positioned with respect to data center customer trends. “Distributed inferencing continues to be a hot topic and AMD shines here because of its strength in memory bandwidth and capacity,” observed MS Hwang, Research Director.

Wrapping up

• This quarter’s earnings report confirmed the market fit for AMD GPUs in the AI landscape. AMD is growing rapidly and is improving its gross margin profile with higher ASPs. The company has a compelling value proposition and pricing power with its customers.

• AMD’s second-largest region in terms of revenue contribution in FY24 was China with 24%. As such, tariff pull-ins played a role in the robust Q1 2025 revenues and are expected to play a role in Q2 revenues too. The concerning part for AMD is that, unlike NVIDIA, the percentage of revenues it gets from China is increasing, rather than declining.

• The client segment generates about 30% of AMD's revenues. This segment should see some upside in the second half of the year due to Microsoft Windows 10’s end of life and enable AMD to gain share against Intel, before Intel’s 18A is ready. AMD is also expanding its consumer and commercial AI PC offerings (Ryzen AI Max, Max Pro, AI 300 and AI 300 PRO) in preparation for what should be a PC TAM expansion in 2025 due to the refresh cycle, unless PCs are no longer exempt from tariffs and the US falls into a recession.

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